Today’s returns are driven by the details

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  Susan Niederhöfer
  Chefredakteurin

Why is the fixed-income sector regaining importance for professional Swiss investors right now?

Fixed income is once again offering what has long been missing: predictable cash flows, diversified sources of return and actively manageable duration. With the Swiss National Bank’s (SNB) key interest rate at 0% and annual Swiss inflation most recently at 0.5%, high-quality CHF bonds may not be a miracle source of returns, but they are an important component of stability and liquidity. Investors who are prepared to include segments offering slightly higher yields will find attractive investment opportunities in high-yield and emerging-market bonds, as well as in Structured Products.

How has the fixed-income landscape changed structurally since the COVID-19 pandemic and the return to higher interest rates?

Interest rate and inflation risk have become more apparent, whilst at the same time the investment universe has expanded significantly. Higher interest rate volatility is constantly creating new relative value opportunities along the yield curve, across credit segments and across different currency areas. Furthermore, the importance of security selection, duration management and flexible payout profiles has increased. The most significant change is therefore not just the return of the coupon, but the wider range of possible portfolio solutions.

Under which conditions does fixed income offer strategic added value compared with cash?

When investors take into account not only the current yield, but also the investment horizon and the risk associated with reinvestment. Cash offers flexibility, but its future return is uncertain. A bond or a Structured Product can lock in returns over a defined term and be specifically tailored to meet obligations. The decisive factor is the expected return after fees, currency hedging, credit and liquidity risks. Fixed income is particularly worthwhile where predictability has its own economic value.

What factors should investors consider before increasing duration?

Duration should not be managed solely on the basis of interest rate expectations. The yield curve, real returns, roll-down, convexity and the structure of liabilities are also relevant. A maturity ladder can reduce reinvestment risks, whilst a barbell structure combines liquidity with longer-term return potential. In addition, Structured Products can be used to specifically replicate maturity, interest rate or repayment profiles which are not readily available on the traditional bond market.

How can CHF-based investors strike the right balance between their home market and global diversification?

A substantial allocation in Swiss francs makes particular sense if liabilities and liquidity requirements are also denominated in this currency. However, focusing exclusively on the Swiss market limits the potential for returns and diversification. Global bonds, on the other hand, provide access to additional sectors, maturities and credit risk premiums. We, therefore, normally recommend hedging foreign exchange risks. In addition to traditional hedging options, quanto structures can offer an efficient way of combining a foreign investment profile with a defined payout in Swiss francs.

Are active strategies and fixed-income ETFs competitors or complementary components within a portfolio?

ETFs are particularly well-suited to transparent, cost-effective and broadly diversified core holdings. Index funds are of particular interest to Swiss investors, as they are not subject to Swiss stamp duty and are traded at net asset value (NAV). Active management can add value when title selection, liquidity management or the avoidance of downgrades are crucial. This applies, in particular, to less liquid credit segments and more complex capital structures. Structured Products complement both approaches when an investor is seeking a specific return, risk or maturity profile. ETFs, active funds and certificates are therefore not opposites, but rather different tools.

How can Structured Products be usefully integrated into a professional fixed-income allocation?

Their strength lies in their ability to be customised. Callable notes, floater structures, credit-linked notes or products with conditional capital protection allow market expectations and risk budgets to be implemented more precisely than with a standard bond. Investors can, for example, trade a higher coupon for a defined credit, interest rate or repayment risk. Structured Products are particularly interesting where the standardisation of an ETF clashes with a specific commitment or market view held by the investor.

When does it make sense to incorporate currency hedging via a “quanto” feature?

A “quanto” makes sense when investors wish to gain access to a foreign market or underlying, but want to keep the investment return predictable in CHF. In this case, the currency hedging becomes a fixed feature of the product and does not need to be managed separately. This reduces operational overheads and can be particularly valuable in the case of more complex payout profiles. A structure without a “quanto”, on the other hand, offers greater flexibility and may be attractive if the investor has a specific view on currency movements or wishes to manage the hedging themselves.

Which criteria are crucial when selecting a Structured Fixed-Income Product for professional investors?

Key considerations include the payout profile, the issuer’s credit rating, the quality of the underlying, the maturity and secondary market liquidity. Equally important is the question of what components make up the coupon and under which scenarios the repayment may deviate from the nominal value. Good Structured Products are not characterised by the highest coupon, but by a transparent balance between return and risk taken on. For institutional investors, documentation, valuation, market-making and integration into existing limits are also crucial.

Which elements should form part of a modern fixed-income strategy for professional Swiss investors today?

A core-satellite architecture is recommended: the core consists of high-quality CHF bonds, Swiss index funds and currency-hedged global investment-grade bonds. On the Swiss primary market, it is also worth examining new issues, as issue premiums are occasionally offered. Active strategies in higher-yielding credit segments and Structured Products serve as satellites. The latter enable bespoke coupons, defined redemption profiles and integrated currency management.

Many thanks, Nicolas Peter, for your time and these fascinating insights.

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About the Author

Nicolas Peter has been Managing Partner and co-founder of Aquila Investment Partner AG since 1 January 2026. Aquila Investment Partner AG is an independent asset manager specialising in serving private and institutional clients. Prior to this, he spent over nine years as Head of Investments & Wealth Management and is a member of the Executive Board at Aquila AG.

Nicolas Peter began his career in investment advisory at Coutts & Co., initially in Geneva and Zurich, where he advised international private and institutional wealth management and advisory clients. Between 2011 and 2016, he led various teams within the Portfolio Management unit and was most recently Head of Discretionary Portfolio Service.